McGill and Partners has joined forces with Renew Risk to construct catastrophe models tailored for offshore wind portfolios.
This collaboration aims to address the growing need for comprehensive catastrophe modelling, particularly as offshore wind projects extend further into high-risk zones.
The industry can gain a better grasp of risk, quantify it, set appropriate (re)insurance limits, and comprehend aggregation across multiple wind farms within a region through better models, the company explained. Ultimately, it is also expected to bolster insurance capacity, benefiting developers by allowing (re)insurers to offer more competitive and sustainable products while reducing their own capital requirements and volatility.
Renew Risk, leveraging deep data methodologies and drawing from extensive insights from the McGill and Partners team, has created five initial models within the Oasis framework — an open-source cat model platform. These models cover areas such as Northeast US hurricane, Taiwan earthquake and typhoon, and Japan earthquake and typhoon.
These models also provide a more comprehensive understanding of natural peril risks, enabling appropriate insurance limit determination and enhancing the understanding of risk aggregation across multiple wind farms in a region.
In a traditional sense, assessing the catastrophe risk for offshore wind farms relied on general rules of thumb for different regions or by modelling risks akin to onshore. Notably, as McGill and Partners pointed out, there have been no commercially available models specifically for offshore wind farms in areas of interest, where numerous offshore assets are increasingly being developed, often in highly exposed natural catastrophe peril zones.
“There has been a pressing need for a custom-built offshore wind catastrophe model to accurately assess the probability of loss for this rapidly developing asset class in high-risk zones,” said Tom Saxton, McGill and Partners head of renewables, power and energy Tom Saxton. “These models will assist both offshore wind clients and insurers to access more efficient risk transfer capital. They will enable insurers and reinsurers to price coverage more accurately, understand asset class aggregations, and assess offshore wind's impact on other lines of business – previously inaccessible insights. This will give insurers and reinsurers the confidence to provide greater capacity at more appropriate pricing levels to our offshore wind clients in high catastrophe zones.”
Renew Risk CEO Ashima Gupta also commented on the development of these models, saying that offshore wind is vital in the transition to a renewable energy economy.
“As the industry witnesses a surge in new projects located in regions susceptible to natural disasters, it is important to have robust risk models which will allow (re)insurers to appropriately assess the risk of these billion-dollar assets constructed in the deep sea. With our state-of-the-art data science-driven risk models, we can enable our clients to thoroughly assess the intricate risks associated with natural disasters, thereby instilling the confidence needed to furnish these projects with precisely tailored insurance coverage. By offering this robust risk management solution, we are actively contributing to the progress towards a greener and more sustainable energy landscape,” Gupta said.
What are your thoughts on this story? Please feel free to share your comments below.